DELCO REMY INTERNATIONAL INC - 10-Q Quarterly Report

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2002
or
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to .

COMMISSION FILE NO. 1-13683

DELCO REMY INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)

Delaware (State or other jurisdiction of incorporation or organization)	35-1909253 (I.R.S. Employer Identification No.)

2902 Enterprise Drive Anderson, Indiana (Address of principal executive offices)	46013 (Zip Code)

(765) 778-6499
(Registrant’s telephone number, including area code)

Not Applicable
(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days:

Yes X

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.

	Outstanding as of August 9, 2002

Common Stock - Class A Common Stock - Class B Common Stock - Class C	1,000 2,497,337.49 16,687

Delco Remy International, Inc. and Subsidiaries

INDEX

PART I	FINANCIAL INFORMATION		Page

	Item 1	Financial Statements

		Condensed Consolidated Balance Sheets	3

		Condensed Consolidated Statements of Operations	4

		Condensed Consolidated Statements of Cash Flows	5

		Notes to Condensed Consolidated Financial Statements	6

	Item 2	Management's Discussion and Analysis of Financial Condition and Results of Operations	20

	Item 3	Quantitative and Qualitative Disclosures About Market Risk	24

PART II	OTHER INFORMATION

	Item 1	Legal Proceedings	25

	Item 6	Exhibits and Reports on Form 8-K.	25

SIGNATURES			26

PART I FINANCIAL INFORMATION

Item 1. Financial Statements

Delco Remy International, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(in thousands)

		June 30,			December 31,
		2002			2001

		(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	34,795		$	23,868
Trade accounts receivable, net		187,042			155,404
Other receivables		12,273			8,944
Inventories		288,362			284,693
Deferred income taxes		18,814			21,175
Assets of discontinued operations		9,176			41,434
Other current assets		16,671			12,895

Total current assets		567,133			548,413

Property and equipment		303,582			294,582
Less accumulated depreciation		132,131			118,727

Property and equipment, net		171,451			175,855

Deferred financing costs		16,089			12,640
Goodwill, net of accumulated amortization		185,348			179,528
Investments in joint ventures		12,581			11,144
Deferred income taxes		15,039			10,476
Other assets		11,011			9,349

Total assets	$	978,652		$	947,405

Liabilities and stockholders' equity (deficit)
Current liabilities:
Accounts payable	$	160,353		$	128,781
Accrued interest		10,134			10,100
Accrued restructuring charges		18,368			28,268
Liabilities of discontinued operations		5,789			8,605
Other liabilities and accrued expenses		58,762			56,412
Current debt		23,049			6,771

Total current liabilities		276,455			238,937

Long-term debt, less current portion		614,352			593,178
Post-retirement benefits other than pensions		22,669			25,812
Accrued pension benefits		10,299			10,216
Accrued preferred dividends		35,353			20,971
Other non-current liabilities		6,378			6,655
Commitments and contingencies
Minority interest in subsidiaries		30,306			30,107

Stockholders' equity:
Preferred stock – Series A		223,728			223,728
Common stock:
Class A shares		–			–
Class B shares		3			3
Class C shares		–			–
Retained deficit		(226,828	)		(178,762	)
Accumulated other comprehensive loss		(14,063	)		(23,440	)

Total stockholders' equity (deficit)		(17,160	)		21,529

Total liabilities and stockholders' equity (deficit)	$	978,652		$	947,405

See Notes to Condensed Consolidated Financial Statements

Delco Remy International, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(Unaudited)
(in thousands)

	Three Month Period						Six Month Period
	Ended June 30						Ended June 30

		2002			2001			2002			2001


Net sales	$	282,482		$	255,557		$	541,133		$	501,197
Cost of goods sold		233,451			204,611			442,483			407,020
Special charges - cost of goods sold		–			2,184			–			4,282

Gross profit		49,031			48,762			98,650			89,895

Selling, general and administrative expenses		25,817			23,402			50,116			49,773
Amortization of goodwill and intangibles		58			1,554			91			3,114

Operating income		23,156			23,806			48,443			37,008

Interest expense		(14,968	)		(14,294	)		(30,197	)		(26,813	)
Non-recurring merger and tender offer expenses		–			–			–			(3,676	)
Other non-operating income (expense)		(361	)		527			(363	)		878

Income from continuing operations before income
taxes, minority interest in income of subsidiaries,
loss from unconsolidated joint ventures and
extraordinary items		7,827			10,039			17,883			7,397

Income tax expense		2,810			3,329			5,723			2,597
Minority interest in income of subsidiaries		(1,732	)		(2,500	)		(3,535	)		(4,322	)
Loss from unconsolidated joint ventures		(269	)		(131	)		(1,470	)		(522	)

Net income (loss) from continuing operations
before extraordinary items		3,016			4,079			7,155			(44	)

Discontinued operations:
Loss from discontinued operations (including
estimated loss on disposal of $33.5 million in
2002)		(41,454	)		(1,399	)		(46,303	)		(4,066	)
Income tax benefit		(4,961	)		(564	)		(6,572	)		(1,524	)

Loss from discontinued operations		(36,493	)		(835	)		(39,731	)		(2,542	)

Extraordinary items:
Gain (loss) on early extinguishment of debt, net
of income tax		(1,108	)		698			(1,108	)		698

Net income (loss)		(34,585	)		3,942			(33,684	)		(1,888	)

Preferred dividends		7,623			7,361			14,382			7,361


Loss attributable to common stockholders	$	(42,208	)	$	(3,419	)	$	(48,066	)	$	(9,249	)

See Notes to Condensed Consolidated Financial Statements

Delco Remy International, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(in thousands)

	Six Month Period
	Ended June 30

		2002			2001

Operating activities:
Net loss	$	(33,684	)	$	(1,888	)
Adjustments to reconcile net loss to
net cash provided by (used in) operating activities:
Loss on disposal of discontinued operations		29,935			–
Extraordinary items		1,108			(698	)
Depreciation		14,672			13,794
Amortization		91			3,114
Minority interest in income of subsidiaries		3,535			4,322
Loss from unconsolidated joint ventures		1,470			522
Deferred income taxes		(275	)		(1,660	)
Post-retirement benefits other than pensions		(3,143	)		1,877
Accrued pension benefits		83			(46	)
Non-cash interest expense		1,566			339
Changes in operating assets and liabilities, net of acquisitions
and non-cash special charges:
Accounts receivable		(30,786	)		(26,048	)
Inventories		(2,657	)		(4,564	)
Accounts payable		31,059			6,199
Other current assets and liabilities		(6,005	)		(4,458	)
Cash payments for restructuring charges		(11,668	)		(1,619	)
Non-cash special charges		–			4,282
Other non-current assets and liabilities, net		5,046			4,071

Net cash provided by (used in) operating activities		347			(2,461	)

Investing activities:
Acquisitions, net of cash acquired		(7,399	)		(22,749	)
Purchases of property and equipment		(9,632	)		(8,489	)
Investments in joint ventures		(3,000	)		(1,061	)

Net cash used in investing activities		(20,031	)		(32,299	)

Financing activities:

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